Guide to Deposit Disputes and Damages Welcomed by LettingFocus

The three deposit protection schemes in England and Wales have issued new guidance for landlords and tenants. It is called “Guide to Deposit Disputes and Damages.”

At LettingFocus.com we say it is broadly welcome and has been badly needed for some time.

You may recall that just a month or so ago I was blogging on the need for some clarification from tenancy deposit schemes in relation to what is an acceptable quality of an inventory. In that blog post, which you can read here:  http://bit.ly/hXOwDx I suggested that, with the introduction of the tenancy deposit schemes back in 2007 came an enhanced need for landlords to get much sharper on their inventory management processes.

But I also said that what had concerned me was that in recent years there seems to have been something of a drift occurring with some people saying, “You always need an independent inventory clerk to do it and you can’t just do it yourself because in the event of a dispute an adjudicator might think it was biased.”

The new guidelines appear to have clarified this a little and suggested some sensible things that landlords who choose to do inventories themselves can do to protect their position.

What’s the Point of an Inventory in Let Property?

The job of the property inventory in a let property is to state clearly what the state and condition of the property is at the beginning and the end of the tenancy. A proper inventory matters to both parties because a landlord can only make a deduction if the tenant causes damage to a property or its contents or its state and condition – between the beginning and the end of the tenancy – and which is beyond normal fair wear and tear.

A Bit of History – Bad Inventories and the Consequences for Landlords

Even before tenancy deposit schemes started, it was never good enough to write an inventory on the back of an old piece of paper.

Landlords doing this have always been asking for trouble because in the event of a dispute about the state and condition of a property, the exact contents in it or its degree of cleanliness, a landlord who withheld some or all of a tenants’ deposit was always going to be onto a loser.

I have seen numerous examples of landlords whose tenants left the property in a filthy condition and having damaged numerous things. In these cases, where a detailed inventory was absent, landlords nearly always lost if the tenant contested deductions a landlord had made from their deposit to put things right.

This was true even in the days before tenancy deposit schemes started, when tenants had to seek redress through the small claims court (if a solution could not otherwise be agreed with the landlord.)

Tenancy Deposit Schemes Stopped the Rogue Landlords

In April of 2007, tenancy deposit schemes legally formalised the deposit taking and protection process for new assured shorthold tenancies in England and Wales and set up adjudication schemes to deal with disputed cases. This helped tenants, who felt that their deposits had been withheld unfairly.

The simple system enabled more tenants to challenge landlords.

This was a good thing and it certainly worked to stop the amateur landlord who couldn’t be bothered with the expense of doing any type of inventory and the rogue landlord who figured that it was perfectly OK to withhold tenants’ deposits at the end of each and every tenancy on the assumption that the tenant wouldn’t take them to court for fear of the cost or because they were worried about getting a bad reference.

But in my opinion, for some time some clarification has been needed on the inventory issue for both the two “insurance based” schemes (in which landlords keep the tenants’ deposits and only hand it over to the scheme in the event of a dispute) and the “custodial” scheme (where the scheme hold the deposit from inception.)

Inventory Guidelines Welcomed

In the past, I have seen some landlords’ and letting agents’ inventories that are simply lists of items in a property – this type of thing will simply not pass muster in the event of a tenant disputing a landlord’s withholding of a deposit. In other words, a tenant could claim that the whole place was filthy when he moved in, that X Y and Z were already broken and that the “TV” was a small black and white portable, not a Plasma one.

The tenant, could, of course be lying, or more likely, in the case of cleaning, he may a selective memory – failing to memorise how clean it was when he moved in. It doesn’t matter one jot – the landlord, without a good inventory to show the adjudicators probably won’t stand a chance.

The new Guide has usefully clarified under what conditions a landlord can do his own inventory, as opposed to using an independent clerk. This is particularly helpful.

But since 2007, in recognition of the need for good thorough inventories, the inventory management business has grown. I have seen some writers advocate that landlords now need inventory-videos to protect their position.  And of course, there are inventory companies that can do this for landlords – as part of their service or for an additional cost. And why not, that’s their business and in some cases it may help clarify an inventory.

The danger for me was that there was something of a drift occurring. Some landlords I had met over the past year thought they had to use an independent inventory clerk or they had to make a video on every move in and move out date.

I’m glad that the Guide has clarified this and has addressed most of the issues sensibly. The Guide was well overdue.

Q: Is there a real problem concerning some landlords exaggerating the amount of deposit that they retained?

LettingFocus.com: “This is why they brought in tenancy deposit schemes in the first place because the argument was that some tenants weren’t getting their deposits back. There were undoubtedly some rogue landlords who routinely withheld deposits unfairly, but there were probably also an equal number of rogue tenants who completely forgot that about the state and condition of the property when they moved in and who left properties in a mess, resulting in costs to the landlord.”


Q: Should landlords and tenants attempt to settle any disputes themselves before contacting a tenancy deposit scheme?

LettingFocus.com: “Yes and one thing that would help to sort out any disputes with the way people leave a property would be to do what I do when my tenants give notice.

About a month before the end of tenancy I will send them a copy of the inventory from when they moved in and some guidelines about what I expect in terms of cleaning. I find that always works and I have not had to withhold any deposit monies for damages or cleaning for 15 years.”

“Most people if they are told up front what to do will do it. Unfortunately, what happens is that many letting agents and landlords are not so proactive and don’t tell the tenants anything. The tenant may then leave it in a state and the landlord has got a problem, has to withhold some of the deposit to cover damages and may have a dispute, if the tenant feels the withholding of the deposit has been unfair. “

If landlords and agents were a bit more proactive at the end of a tenancy then they would have a lot less problems than they have.”

MORE ABOUT LETTINGFOCUS AND WHAT WE DO

LettingFocus.com is the home of Private Rented Sector Consultancy and expertise and I’m David Lawrenson, a landlord and property investor myself for over 25 years and best known as the author of “Successful Property Letting” – the UK’s top selling commercially published property book for the last 3 years. 26,000 copies sold (up to Feb 2011).

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